AAM sells stake, points to consolidation
Melbourne-based Easton Investments has taken a 19.9% equity stake in Singapore’s AAM Advisory, in a move aimed at boosting support for Australian expatriates in the Lion City.
The deal is part of a plan by the Australian wealth management and advisory firm to buy stakes in Asia-based advisory businesses. It aims to build up a combined $1 billion in assets under advisory and $300 million in AUM over the next year or so.
AAM Advisory provides financial advisory services to Singapore’s affluent and high-net-worth expatriate population, and has more than 1,500 clients and over $250 million in AUA.
Easton is also in the process of acquiring 35% of Financial Partners, an IFA firm in Hong Kong, with the remainder to be held by three principals. The IFA has $400 million in AUA, 24 advisers and 20 support staff; it also has 50 clients with over $1 million and 500 clients with more than $500,000.
Easton, with A$750 million in AUA and AUM combined, owns numerous IFAs in its home market, but typically when Australians go abroad, their superannuation provision gets neglected, notes Matthew Dabbs, CEO of AAM. The deal should ensure that the super funds of the 20,000-plus Australians living in Singapore are looked after even though the individuals are not contributing.
The plan is that AAM, with advice from Easton, will help to maintain these super funds, assuming that the Monetary Authority of Singapore gives approval.
The deal comes on the heels of last week’s unveiling of proposed new rules on the provision of financial advice in the city-state. One likely outcome of the Financial Advisory Industry Review recommendations is consolidation of smaller financial advisory firms as costs rise.
“The new capital requirements will definitely affect smaller players in the FA market,” says Dabbs. “They are likely to mean consolidation, and Easton’s access to capital means we may be able to acquire more players if the opportunity arises.”
The proposals are to designate a certain standard of operational infrastructure and net asset value. For example, Dabbs sees 10-12 players of note in the expat-focused FA space and he expects that number to fall to four or five. He cites the closure of Ipac as an early indicator of this trend, and says at least one or two others are in the process of shutting down, but declined to name them.
Another proposal is that upfront commission payments are spread over three years (on a 40/30/30 basis). “This will have an effect, of course,” says Dabbs, “but in the long term it will be a good thing, as it will mean FAs ensure clients understand what they are investing in.
“The industry has to be prepared for it,” he adds, “because I’m pretty sure it will come in if it’s been mentioned.”
The remaining 80.1% of AAM equity is held with the company’s directors, says Dabbs, but others may show interest in it as industry consolidation progresses.